Labour to tackle PFI risk

Labour's shadow Transport Secretary Michael Meacher has set out Labour's blueprint for its own private finance initiative and in doing so underlined the party's backing for private projects.

Speaking at a PFI conference this week, Meacher criticised the Government's 'failure to address risk allocation' and said that the PFI should state 'unequivocally' which risks are not for transfer. These risks, said Meacher, should include changes in legal status, safety codes, national interest considerations, project selection, government permissions and risks which could provide unfettered returns for the private sector such as pricing and labour.

Meacher also launched a scathing attack on DBFO roads which he said were too risky to offer value for money. 'The evidence so far is that the Government will take on the most risk to ensure the private sector gets involved in order to make it look like a success.'

He also warned that the risks and costs of DBFO roads meant only large contractors could compete which could open the doors to cartels. 'This won't be the first time,' he added. 'In 1991, the National Audit Office revealed that lane rental was dominated by five contractors. So much for value for money.'

Instead of shadow tolls he called for 'more imaginative' alternatives such as 'transferring planning gains, allowing changes in regulations in return for investments in priority projects or making positive use of property development rights.'

He suggested that interest rate risks and political risks could be capped. Usage and operational cost risks could also be guarded against by 'the free transfer of land with sell back options at periodic times through the operational life of the project at set values'.

Meacher also called for clear guidelines on the amount of compensation and tax exemptions for front ended expenditure and intellectual property rights.

The Labour Party is now planning to set up a task force of PFI experts.